A corrective action plan indicating how Bloomfield Township will address underfunded retirement benefits was unanimously approved Monday, May 20, by the Municipal Sustainability Board at the Michigan State Treasury.
The township announced in December 2018 that changes to state accounting laws that had gone into effect require municipalities to fund at least 40 percent of their unfunded liabilities, including other post-employment benefits (OPEB), which includes benefits such as medical, dental, vision and life insurance for retirees and their spouses. The changes meant the township can no longer pay for those expenses as employees retire and accrue actual costs, as they have for decades, or pay-as-you-go, a practice used by many municipalities.
Under the Protecting Local Government Retirement and Benefits Act, or Public Act 202 of 2017, municipalities that have at least one retirement health benefit system that has been determined to be underfunded must submit a corrective action plan. A retirement health system is considered underfunded if it is less than 40 percent funded, and if the annual required contribution for the retirement health system of the municipality is greater than 12 percent of that government's annual fund revenues.
The law requires local municipalities to report and have a collective action plan for each retirement pension benefits and/or retirement health benefits account to the state treasury of each plan's funded ratio by specifying assets and liabilities; the annual required contribution, if it is a retiree health care plan; the actuarial determined contribution required, if it is a retirement pension plan; and the local unit of government's annual fund revenues.
For pension plans, the criteria for underfunded status is less than 60 percent funding; and for retiree health systems, less than 40 percent funding.
As of January 1, 2018, municipalities had to develop collective action plans to show how they would get to a minimum of 40 percent funding in the next 30 years if they were determined to be “underfunded.” In February, Bloomfield Township submitted a corrective action plan that was denied by the state as a community survey and specific actions were not yet considered complete.
The township had 60 days to revise and resubmit its plan. In the interim, the township board of trustees approved putting a a proposed 2.3-mill tax intended to help fund retiree benefits over the next 15 years through the creation of a special assessment district (SAD) dedicated to public safety operations on the August ballot. If approved, the SAD would provide about $9 million a year to police and fire operations, which would provide $1.5 million to OPEB liabilities. The township would also be required to let expire at the end of 2019 a 10-year general millage approved in 2010 , thus eliminating $4.85 million in current tax revenues. The measure would provide an overall increase of 1.05 mills to public safety, decreasing the township's general fund contribution to police and fire by $1.9 million each year.
On Monday, May 20, township supervisor Leo Savoie, clerk Jan Roncelli and treasurer Brian Kepes travelled to Lansing to present their revised corrective action plan to the Municipal Sustainability Board, which approved the Bloomfield Township plan for OPEB.
Savoie, Roncelli and Kepes all said the board liked the plan for the SAD election, which is designed to get to the state mandated funding level by 2033, and to be fully funded by 2043, based on actuarial assumptions.
“If it (the SAD) does not pass, we told them here is what we will cut, in terms of both personnel and programs,” Savoie said.
Bloomfield Township has approximately $164 million in unfunded retirement liabilities.